Government publishes response and draft regulations on equal pay audits

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The Government has published its response to its consultation on equal pay audits together with draft regulations which are intended to come into force on 1 October 2014.

When implemented, the Equality Act 2010 (Equal Pay Audits) Regulations 2014 (the "draft Regulations") will require an employment tribunal to order an employer to carry out an equal pay audit where it finds there has been an equal pay breach unless one of the specified exceptions applies. These include where:

• the employer has already carried out a relevant equal pay audit within the previous three years;
• the breach which the tribunal has found gives no reason to think there may be other breaches; or
• the disadvantages of an audit would outweigh its benefits.

In broad terms, the draft Regulations:

• set out the minimum requirements for the content of an equal pay audit with employment tribunals having the discretion to specify some details on a case by case basis such as employee coverage and timescale for completion (subject to a minimum of three months);
• empower employment tribunals to determine whether an equal pay audit complies with its order and where it does not, to impose financial penalties (payable to the Secretary of State) of up to £5000 in appropriate cases;
• require an employer to publish the completed equal pay audit on its website for a period of at least three years (once it has been determined by an employment tribunal to be compliant with the relevant order) and to inform all persons about whom relevant gender pay information was included in the audit where they can obtain a copy. Where it would breach a legal obligation (for example data protection rights), publication may not be required, but this will be an issue for an employment tribunal to determine and in its response the Government indicated that it envisages such instances would be rare.

Micro-businesses and "new businesses" will be exempt from being required to carry out an equal pay audit under the draft Regulations, but there are fairly complex provisions for determining if a business falls within one of these two definitions.

In its response, the Government said that it does not intend to publish guidance on equal pay audits or the draft Regulations because to do so would duplicate guidance already published by the Equality and Human Rights Commission (which can be viewed here and here). It intends, however, to consider engaging business and employer groups in the summer and autumn to discuss and explain the intended effect of the draft Regulations when they come into force.

The full text of the Government's response can be viewed here and the draft Regulations here.

Practical advice

• The draft Regulations remain subject to the approval of Parliament. If they come into force as intended, employers will need to take the tribunal's obligation to order an equal pay audit into account when considering whether to settle equal pay complaints and, more generally, in ensuring that their pay policies and practices are in line with equal pay legislation.
• As currently drafted, the draft Regulations will apply in relation to relevant complaints made on or after 1 October 2014. This means that it is likely to be well into 2015 before we see how employment tribunals determine the applicability of the exceptions to and exemptions from the requirement to carry out an equal pay audit and the scope of the audits themselves.